Gold sees attention shifting to equities

The U.S. Comex gold futures rose on Thursday by 0.71% to $1,392.50. Week-to-Thursday, the gold futures are down 7.25% while year-to-date, the prices are down 16.91%. Gold has returned 17% per year in the previous ten years. However, the gold futures entered into a bear market on 12 April as the big sell-off began. The S&P 500 index fell 2.09% in the past two days while the Euro Stoxx 50 index also dropped 2.06%. The Dollar Index rose 0.30% this week with the Euro/Dollar dropping 0.47% and the yen rising 0.20% against the dollar. The CRB Commodity index suffered a loss of 1.50% this week.

Stocks Declined as Gold Rebounded

Market's concerns have shifted to equities after the gold's downturn. Bloomberg highlighted that the U.S. stocks peaked in April in the past three years and declined for the next two to six months. The sentiment toward stocks and commodities has been weak as economic data from the U.S. and China were weaker than expected while some earnings results were disappointing. The U.S. leading indicators index, a gauge for the economy in the next three to six months, dropped 0.1% in March compared to an expected increase of 0.1%. The expansion at both the Philadelphia and the New York regions cooled in April with inventories plunging.

Debates on Gold

After the gold price plunge, the Chinese, Indian and Thai retail buyers rushed to buy gold. The April U.S. Mint sales more than doubled from March to April while the Australia's Perth Mint saw its sales doubled in one week. Central banks are watching closely the price level to re-enter even though some bank analysts are calling for gold prices to go toward $1,000. The gold-backed ETP holdings declined by 2.41% this week to 2,348 metric tons and dropped 10.8% this year. A stronger dollar remains a danger for gold.

What to Watch

The important events and data to watch next week will include the April "Flash" manufacturing PMI from China, the E17 and the U.S. on April 23, the April Germany IFO business climate index and the March U.S. durable goods orders on April 24, and the Bank of Japan policy rate meeting on April 26.